FGV’s 2017 profits dissected – What are they hiding from Malaysians?

In February 2018, Felda Global Ventures (FGV) announced its results for the financial year ended 2017. The results reported was nothing short of shocking and it seemed like FGV is finally starting to soar financially.

Since its listing in 2012, there have been many reports on how FGV is losing money and how it squandered the funds raised from its IPO on questionable and poor investments. So how exactly did FGV bounce back with such gusto in 2017?

In the press briefing announcing the 2017-year end results, FGV group president and CEO Datuk Zakaria Arshad said, “The plantation sector registered a significant improvement with a profit of RM554mil from RM234mil in the previous year.” He also added that “the stronger performance, was due to higher fresh fruit bunches (FFB) FB production, better crude palm oil (CPO) sales margins and stronger performance from JV companies.”

Upon reviewing the financial statements of FGV, we noted that FGV failed to highlight that RM106 million of the RM554 million profit (approx. 20%) was derived from non-core plantation sources, due to a one-off gain from the disposal of a long-term investment of RM73.13 million and an improvement in share of results of joint ventures of RM32.97 million. Why was this information as a whole not highlighted to the public?

Additionally, FGV’s sugar sector’s profit declined by a whopping 99% to RM1.89 million from RM151.81 million in previous year due to “higher raw sugar material costs and weakened Ringgit despite improvement in selling price”, according to FGV’s 4th quarterly report for the financial year ended 2017.

In 2016, its sugar business contributed RM4.19 billion in revenue while in 2017 it reported a revenue of RM4.38 billion, a slight increase from 2016. Given the rather similar revenue contribution, can ‘higher raw sugar material costs and weakened Ringgit’ really lead to a 99% decline in profits? How does a corporation as large as FGV wipe out an entire profit stream in the span of 12 months?

Additionally, in the first nine months of 2017, FGV registered a net profit of RM67.2 million and a mere 3 months later a net profit of RM143.7 million was registered (an increase of RM76.5 million or 2.1x for the period from October 2017 to December 2017). How does FGV explain doubling its net profits in the span of 3 months?

So, it seems Datuk Zakaria Arshad’s announcement of FGV’s fantastic financial year for 2017 was a carefully orchestrated wordplay to divert the public’s attention from the recent news of Felda’s RM2 billion loss. Why trump up a RM554 million profit when you squandered away RM2 billion, an amount that is 4x more than your profits?